Flora auction is a butter-up
UNILEVER has offered investors a multibillion pound sweetener as it seeks to rally support after rejecting a £115billion takeover from Kraft Heinz.
The FTSE 100 food and consumer products group plans to sell off its margarine division, which makes Flora, Stork and I Can’t Believe It’s Not Butter, accelerate its cost-cutting and target substantially higher profit margins.
Wide-ranging measures also include returning ¤5 billion (£4.3billion) to shareholders through share buybacks and increasing dividend payout by 12 per cent, as well as merging its foods and refreshment.
Unilever, whose brands include Persil, Dove, Marmite and Ben & Jerry’s ice-cream, was spurred into a “comprehensive” strategic review in February to justify its decision to dismiss Kraft Heinz’s proposal as “without financial or strategic merit” and set out its credentials for remaining independent.
The UK and Holland-based group will review its dual-headed legal structure to simplify the business and make it more flexible.
Chief executive Paul Polman, pictured, said the review had highlighted the opportunity for Unilever to “go faster and further” with its transformation. He indicated Unilever might be interested in buying the food brands, including French’s mustard, put up for sale by Reckitt Benckiser.
He said: “We need to accelerate plans to unlock further value faster, and this was brought home to us by the events of February. However opportunistic it was, it [the Kraft approach] did raise expectations. We are determined to use it as an opportunity to place Unilever on an even strong footing.
“After a long history in Unilever, we have decided that the future of the spreads business lies outside the group.
“We will support our business with a higher level of leverage [debt], while retaining a strong credit rating. This will enable us to enhance value for shareholders through increased capital returns, while maintaining operational and strategic flexibility.”
ETX Capital’s Neil Wilson said: “The approach from Kraft Heinz was a massive wake-up call. Unilever wants to make sure shareholders are not tempted by another bid although it smacks a little of short-termism.”